The earnings miss by Citigroup, which only survived the financial crisis thanks to a massive taxpayer bailout, stoked concern that the bank has yet to resolve the operational weaknesses that have plagued it for years.

Shares of Citigroup, which have rallied strongly over the past year as the U.S. gradually sold off its stake in the bank, were down 4.1 percent in early trading.

The bank's fixed-income revenue alone dropped 58 percent from the third quarter, compared to a 7.9 percent drop at larger rival JPMorgan Chase & Co, which reported its fourth-quarter earnings on Friday.

"This was one of the weaker quarters for trading," Chief Financial Officer John Gerspach told reporters in a conference call, acknowledging Citi's investment bank has also struggled in other areas like the M&A league tables.

The bank's weak trading results unsettled investors, who had been reassured by the more moderate than expected drop at JPMorgan, ahead of other big bank earnings later this week including Goldman Sachs Group Inc on Wednesday, Morgan Stanley on Thursday and Bank of America Corp on Friday.

Citigroup, which took $45 billion in U.S. bailout funds during the financial crisis, reported a net profit of $1.3 billion, or 4 cents per share, for the fourth quarter. The EPS was 50 percent below what analysts had expected, according to Thomson Reuters I/B/E/S.

Citigroup released about $2.3 billion in reserves for bad loans, mainly due to an improvement in the store credit cards business it has put up for sale.

But a slump in Citigroup's securities and trading unit hurt revenues, which fell 6 percent on a managed basis from the third quarter to $18.4 billion.

"My guess is, Citi wishes they had more loan loss reserves that they could have released to get earnings. Eventually, you need real revenue growth if you're going to get profit growth, you can't just keep releasing reserves," said Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor.

Citigroup took a $1.1 billion hit to results, before taxes, because of a credit value adjustment. That adjustment — which Gerspach said accelerated after the government finished selling its Citi stake — is due to the bond market's perception that Citi's credit quality improved during the quarter.

Under accounting rules, that improvement forces the bank to take charges because its liabilities are theoretically worth more.

Pandit has sold assets, laid off staff and tried to focus Citigroup on its main businesses, including investment banking and retail banking for affluent customers globally but the latest results show that his overhaul remains a work in progress.

In a memo to employees, Pandit predicted that 2010 would be remembered as "the year Citi turned the corner."

It was the fourth consecutive quarterly profit for Citigroup, and its first since the U.S. government finished selling off its stake in the company last month.

Shares of Citigroup closed at $5.13 on Friday, their highest close since August 2009. The bank's shares have surged 55 percent since the beginning of 2010, and gained additional momentum last month after the U.S. government sold the last of its stake.